Our worst fears of Tier 1 financial failures coming to fruition remains front and center in the Capital Markets, even outpacing global concerns of ‘another cold war’ happening. The greenback had lost some of its technical luster yesterday. Is the market giving us another opportunity to own it again?

The US$ is stronger in the O/N trading session. Currently it is higher against 14 of the 16 most actively traded currencies in ‘whippy’ trading range. Yesterday, US PPI jumped more than expected last month, up +1.2% vs. consensus expectations of a +0.6% advance. Core-PPI, (ex food and energy) rose by +0.7% vs. a +0.2% expectation in July. Market reaction expects the headline ‘pop’ to get discounted (someone should convince Fisher). The headline was slower than the previous months (+1.8%), but probably more disturbing for the Fed was the spike in core compared to the prior month's +0.2% print. Analysts explained away the spike believing that lagged effects of energy prices sparked much of the gain. Residential gas spiked higher by +8.8%, and electricity prices were up by +2%. But, the collapse in n... Read more »

Filed under: Dean's FX

Even though it only represents about 1% of the planet’s daily oil usage, a fire at the BTC pipeline transporting crude from Azerbaijan to Turkey was cited as the reason oil jumped nearly a buck and a half on Thursday to top out at just over $120 a barrel. Kurdish rebels operating in northern Turkey immediately claimed responsibility but officials said it was too early to confirm that the fire was the result of sabotage and not simply a technical failure.

Even if it turns out that the fire was not sabotage, it still shows how vulnerable the global oil supply is to even minor disruptions. In this case, the BTC pipeline – which contributes a relatively modest one million barrels a day – was enough to reverse two months of falling crude prices.

A spokesperson for British Petroleum PLC which owns just over 30% of the pipeline holding company, noted that it could take up to 15 days to get back on line. Faced with this fact, BP served notice that it would be invoking the force majeure clause of their existing contracts freeing them from obligations to deliver crude oil to its customers for reasons beyond their control.

Of far greater potential consequence is the growing conflict bet... Read more »

Filed under: FXCommentary

With the Global Economies current inflationary worries, the questions is not: If most of the World's Central Banks are going to hike rates to stave of inflation, but rather When are they going to start? The US Federal Reserve has already strongly hinted that their ease cycle is over. What remains unclear is if the current state of the American Economy is strong enough to start a rate hike cycle. The following graph shows the evolution of the Federal Funds Rate since 2004. It has been mentioned recently Federal Reserve Funds Rate started to climb from a rate of 1.00% in June 2003 until reaching a high of 5.25% on June 29th 2006. This marked the first meeting of the Federal Open Market Committee (FOMC) under current Chairman Ben Bernanke.The following FOMC meetings significantly lowered the Funds ... Read more »

Filed under: FXGraph Commentary